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New Home Sales up by 4.3 Per cent in March

The latest New Home Sales Report by the Housing Industry Association reveals that the number of new homes sold in Australia went up for the third successive month in March. After a 0.6 per cent increase in February, the number of sold new homes went up by 4.3 per cent. Sales of detached houses improved by 5.8 per cent though sales of multi-unit properties went down by a surprising ten percent.

The property market is still a long way to go to be considered at a healthy level, the increase in detached houses sold can be attributed to a steady official cash rate and the floods that affected Queensland.

In the first quarter of 2011, new home sales went up by five per cent. However, the improvement was preceded by weak figures during the last quarter of 2010 while total sales are still nowhere near the long-term average. Sales volumes of unit properties three months to March went up by 5.9 per cent while total new home sales were up by nine per cent in the same quarter as compared to the same quarter last year.

If you are looking to enter the property market, finding the right home loan is just as important as finding the right home loan, speak to an eChoice qualified home loan consultant to find out more.

Big Drop in Home Loans

Recent figures from the Australian Bureau of Statistics show that approved home loans in February fell by 5.6 percent to 45,393. This is much higher than the 1.5 percent drop predicted by economic experts. The February figures are the lowest number of approved home loans since February 2001. In New South Wales, home loans went down by a 14-year low 10.1 percent.

The housing market fell across the board and not just in Queensland wherein massive floods affected the area. The fall of the housing market in Queensland is just a part of why the property market fell in the rest of the country during February, it can be partly attributed to the last official cash rate hike by the Reserve Bank of Australia in November 2010.

It is logical that lower property demands will stem from higher interest rates and housing finance commitments have not improved much to turn the tide. Property market activity is expected to remain slow and the Reserve Bank would not want the property market and consumer spending to boost while the mining industry is surging as well.

The figures are reflective Queensland’s lack of improvement from the floods, the November cash rate hike is also hindering improvements. Queensland is expected to be on the way to recovery during the next few months.

Some of the figures show finance for new property construction went up by one percent while non-refinancing new homes went down by just 3.8 percent. In February, home loans in New South Wales and Victoria went down by 10.1 percent and 4.6 percent respectively. This causes some concern for the RBA for these two states have been steadily performing in 2010.

Shrink Your Home Loan

If you have your own property, you can build wealth with capital growth. However, you need to raise the funds to buy a property first. Home loans are vital, paying your home loan diligently will save you more money before interest rates increase once again. If you pay your loan in advance, you can even gain lower interest rates.

More home buyers are looking to refinance in 2011. Before you assess your home loan, you can also choose to speed up its term by doing a number of things. First, you can start saving small amounts and add them to your mortgage repayments. Saving $10 every day can amount to $5000 yearly or $133,000 in interest which can slash nine years of a 25-year loan. It is best to track down your spending to know the expenses that you can cut or do away with.

You can ask your lender to deduct the extra repayment that you made for the principal loan amount. Since interest rates are reverting to pre-global financial crisis levels, extra repayments can be easily made. Also, you can look around for better deals and speak with your current lender and see if they can offer a same deal, if you are not satisfied with the deal, you can opt to refinance.

Whilst paying off your mortgage, you can diversify your investment portfolio to gain more income. In return, you can use some of your extra income to pay off your mortgage faster. You may also use an online calculator to gear up for your mortgage repayments and check how much of your budget is devoted to your home loan.

Do Not Sell If You Do Not Need To

House prices in Brisbane are predicted to go down by as much as 10 percent in the following years if the nationwide price change remains flat therefore advice is do not sell if you don’t have to. The recent flooding in Queensland may have an adverse effect on the price of Brisbane properties especially those in coastal communities.

It is predicted that there will be a price drop in Brisbane over the next 12 months with low-lying areas the most severely affected. However, these predictions are a drop of 35 percent over a 12-month period.

The flood which affected approximately 15,000 homes, caused property valuers to re-assess the property values in the flood-stricken areas, with a decline of about 10 percent now expected.

While the national median price went up by 0.4 percent during the last quarter of 2010 to bring the price to $475,000, the median price in Brisbane went down by 0.5 percent in the same month to $435,000. Experts predict that Australian property prices will go down in 2011. House prices of properties outside Queensland may also drop due to fears of flooding but these would be isolated cases.

House prices in the major Australian cities are expected to be relatively flat. Meanwhile, the Australian Bureau of Statistics reports that national home prices went up by 5.8 percent in 2010.

There are also risks involved in vacant properties or properties where the lease is terminated. Also, property owners in the flood-stricken areas might find it hard to apply for property insurance. In the near future, the real estate market of Queensland will have its ups and downs with house prices going down but rental demand going up.

Slower House Price Growth for 2011

Property analysts say that first home buyers and investors will cause house prices to increase by about five percent next year. With residential property prices at a relatively stable level, a tight residential rental market and normal first home ownership levels, the real estate industry will likely experience growth in 2011.

House price growth will get pressure from increasing rental demands and higher income. Housing demand will be low during the first six months of next year though is expected to pick up after that. The slow movement in the market for the first half of 2011 is due to the latest interest rate increase by the Reserve Bank of Australia.

Increased rental fees will provoke investors to put up more residential properties. There are forecasts of an annual house price growth within the five to eight percent range. Investor finance is also a major factor in determining the growth of house prices but succeeding interest rate increases can do damage.

There are three RBA rate hikes predicted for this year, one in April and the last two coming in during the second half of 2011. Meanwhile, the strong Australian dollar can drive many foreign investors especially Asian investors, away from the market. Darwin and Perth will experience strong growth with Melbourne and Sydney expected to post strong to average growth.

First home buyer activity will pick up during the early stages of 2011 but expected to still exhibit signs of caution. The improving economy and increasing wages will push the demand for residential property.

First Home Market in Australia Falls

The latest figures from the Australian Bureau of Statistics suggest that the first home buyer activity in Australia is in a steady decline. In 2010, government applications went down by as much as two-thirds as compared to 2009 levels. In 2009, a monthly average of 19,000 first home buyers applied for federal grants, taking up grants that amounted to $1 billion. In 2010, the monthly average went down to 7460.

Throughout 2010, there were about 35,000 first time home buyers that took out total grants of $344 million. Also, only a small portion of the over-65 population took the government incentive to transfer in smaller properties. In five months, about 7,300 individuals took the Home Builders Bonus that offers incentives such as the cancellation of the stamp duty fee.

Among all first home buyers in New South Wales, most of them where from the western part of Sydney in suburbs such as Liverpool, Kellyville, Hoxton Park and Westmead. Suburbs in the western part of Sydney generates first home buyer grant finances from $3.3 million to $7.3 million. Since the First Home Buyer Grant was introduced in July 2000, close to 500,000 homebuyers have taken grants amounting to $4.1 billion.

Home Loans Post Best Gain in Seven Months

Home loans have posted the best gain in seven months, with the number of home loan borrowers increasing to a seven-month high, more borrowers are also opting to have fixed home loans. In the month of October, there were 49,307 mortgage applications this is a 1.9 percent seasonally-adjusted increase when compared to the numbers in September. This jump is way beyond the 0.3 percent increase that was predicted by economists.

Out of the total number of mortgages taken in October, 6.9 percent are fixed home loans. This figure is close to three percent better than the 4.4 percent fixed home loan proportion in September. The almost seven percent total in October is the biggest proportion of fixed home loans in a month since July 2009.

However, these numbers came in a time before the Reserve Bank of Australia lifted the official cash rate by 25 basis points to 4.75 percent. In reaction to the RBA’s increase on Melbourne Cup Day, the major Australian banks increased their interest rates beyond 25 basis points. After the cash rate increase and the interest rate increases by the big banks, economists predict that the percentage of fixed home loans will increase further.

First time home buyers are not confident in entering the property market, only making up about 15 percent of all the home loans approved in October. This percentage is the smallest number of first time home buyers since July 2004 and it may drop further when the figures for November are released.

However, the RBA did not move the 4.75 percent official cash rate in their board meeting this month and the cash rate will stay put for two more months as the RBA board will not meet until February 2011

Look Out for Hidden Property Costs

If you want to be a property investor, you must look out for hidden costs. First, you must be aware of all the costs that you must pay aside from the property purchase price. Most properties are tagged with stamp duty fees as well as title fees, registration fees, and mortgages to get funds for the house.

Of course, you will not buy the first house that you see. Since a lot of money is involved in the purchase, you would want to have it inspected first. Thus, you must pay inspection fees and if you have an architect inspect the design of the house and you can also have pest inspections or valuations which all costs money.

To protect your property against incidents that can cause damage or destruction, it is important that you take out insurance and make sure that your coverage is enough. Property insurance can include home and contents insurance, public liability insurance, contents insurance and building insurance. For those who have rental properties, they must have landlord insurance to cover them against tenant injuries.

If you purchased a property that has multiple owners, you might be asked to pay for owners’ corporation or strata fees monthly or yearly. These are charged to cover maintenance costs, security costs and for other expenses needed for property. The strata fee may also include the costs of amenities such as gyms, swimming pools, basketball courts and other recreational areas.

You must also have a contingency fund for all the repair or renovation projects that you may have to pay eventually due to wear and tear. For rental property owners, there might be times that the property does not have a tenant. Thus, they must have a contingency fund of at least a month’s worth of rental fees to pay other expenses such as mortgage, insurance and mortgage fees.

If you are a rental property owner, it is important to note that rental income declines in the long run due to strong capital growth. To avoid this from happening, you can divide your rental income with the property purchase price to get the same income annually. If you do not have the time to overlook your property, you can hire a property manager for a cost.

Finally, you must also have funds for your land tax. Though land tax is not charged in your main residence, you will have to pay this if you have investment properties. If you have many properties, never forget to pay your land tax to avoid charges on tax evasion.

Biggest Residential Building Slump in a Decade

In the third quarter of 2010, the building of residence went down by 6.1 percent to a decade- low, while construction also went down by 2.1 percent to $41.4 billion. The reduction in property construction and weaker demand for properties is due to the reduction of the government stimulus and property price growth.

However, there may be light at the end of the tunnel as the overall costs of construction for the third quarter of the year went up by a two-year high of 0.7 percent. Building activity in the private sector is expected to improve due to the rising economy while businesses will revert to the forecast before the global economic meltdown took place.

Yet, companies are still waiting until strong economic recovery takes place. Though the construction of residential properties is still weak, they have been planning aggressively for future projects. These construction projects are worth $42.4 billion which is 5.9 percent lower than the total during the first quarter of the year.

Though property construction has slowed down, the Reserve Bank of Australia is not worried for more projects are expected in the foreseeable future. However, the recent official cash rate increase by the RBA can bring a negative effect on construction and it would be better for the RBA to keep the official cash rate at 4.75 percent.

In an overall perspective, there should be a bright future for property construction as long as construction costs do not increase too much. Construction activity will pick up eventually due to the surging mining industry and steady population growth.

Property Investors Warned

Property investors have been warned that it is necessary to have an independent and professional property inspection before buying a property so that the quality of the property can be checked. Weak properties can destroy the investment portfolios of self-managed super funds.

Without inspecting the property first, property investors will only find out about the structural issues of the property when they are already living in the place or renting it out. For individuals with self-managed super funds, they must seek the assistance of a professional to conduct property inspection to protect their finances.

Structurally weak properties can deplete self-managed mutual funds due to renovation and maintenance projects such as plumbing, faulty wiring, illegal building and termite infections that could potentially exist in a property. If a property is purchased as an investment, the owner would have to make the necessary renovations first before being able to rent it out therefore missing out on crucial rental income for a period of time.